THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.

Once one of the biggest baggers of groceries in the US, The Great Atlantic & Pacific Tea Company (A&P) has been reduced to a shrinking portfolio of regional grocery chains. It now runs about 300 supermarkets in New Jersey, New York, and four other eastern states. In addition to its mainstay A&P chain, the company operates five banners: Pathmark, Waldbaum's, Superfresh, Food Emporium, and Food Basics. A&P acquired its longtime rival in the Northeast, Pathmark Stores, for about $1.4 billion, but the purchase failed to reverse A&P's lagging fortunes. Indeed, A&P is exploring a potential sale of the company after emerging from bankruptcy in 2012.

Bankruptcy

In March 2012 A&P emerged from 15 months in Chapter 11 bankruptcy after a financial restructuring and closing 75 stores. The company's December 2010 Chapter 11 filing capped years of struggle for the money-losing grocery operator. Bankruptcy documents listed $2.5 billion in assets and $3.2 billion in debt for A&P as of September 2010.

Geographic Reach

New Jersey and New York are home to more than three-quarters of the company's supermarkets. A&P operates about 30 stores in Pennsylvania, and a handful in Connecticut, Delaware, and Maryland.

Financial Performance

Post-bankruptcy, A&P has continued to lose money. While the grocery company rang up an estimated $5.9 billion in sales in fiscal 2014 (ended February), it was unprofitable for the seventh consecutive year. The grocery chain has been selling assets to raise cash and increase liquidity.

Strategy

A&P abandoned its comeback strategy and in July 2013 announced that it's exploring strategic alternatives, including the possible sale of the company. In March 2014, the company appointed a new CEO, Paul Hertz to lead the company.

Under the leadership of former CEO Sam Martin, who joined A&P in 2010 and saw the company through its restructuring, A&P had been pursuing a comeback strategy focused on localization. It involved tailoring each store's product offering to the neighborhood and sourcing fresh-made and locally-grown produce and foods whenever possible. Martin planed to remodel more than half of the company's stores by mid-2017, with the aim of showcasing a neighborhood positioning for each store. Recent remodels include three Food Emporium supermarkets in New York City, that cater to upscale tastes, and a pair of Pathmark stores in New Jersey, one of which caters to Hispanics while the other has a stronger kosher focus. The grocery operator was betting that by renewing its stores and tailoring merchandise and service initiatives to local markets, sales and profits will follow. Still, A&P must contend with fierce competition from nontraditional grocery purveyors (including Costco Wholesale and Wal-Mart Stores), and its customers' changing shopping habits. Prior to putting the entire company on the block, A&P was reported to be considering the sale of its Food Emporium chain in a bid to boost liquidity. Food Emporium stores sit atop valuable Manhattan real estate.

Hurdles to a speedy sale of A&P include the fact that many of its stores are small by modern-day supermarket standards. Also, A&P's aging stores are in need of investment. While the sale of the entire company to another supermarket operator is considered unlikely, a real estate investor might buy the chain and sell off select stores to buyers.

Ownership

The Yucaipa Companies is A&P's biggest investor. A&P exited bankruptcy as a privately-held company following an agreement with Yucaipa, among others, that provided the grocery chain with $490 million in debt and equity financing.